Bankex slides 6.7% on farm loan waiver fears

The BSE Bankex was down 6.7 per cent today, losing 679 points during the day to close at 9,434.

The three biggest losers were Punjab National Bank (down 9.7 per cent), Kotak Bank (9.1 per cent) and State Bank of India (8.8 per cent).

“The correction in banking stocks is both on account of the global correction and the lack of clarity on how the farm loan waiver will be compensated,” said Birla Sun Life AMC CIO A Balasubramanian. The finance minister had announced on February 29 a farm credit waiver of Rs 60,000 crore over the next three years.

“The market is not clear as to what kind of negative impact it will have on credit discipline among rural loan seekers,” said the CIO of a mid-sized mutual fund house.

The fall in prices has thrown open a discount of 5-10 per cent on most of the banking stocks. The BSE Bankex is down 24 per cent since its all time high on January 14, 2008.

These are good entry levels for the long-term, considering the fact that there is nothing drastically wrong that has happened with the banking sector and they are available at good discounts, say experts.

“All falls are good, and if the fundamentals of a stock remain strong, a correction opens up opportunity to invest,” said Anil Kaul, head of research with brokerage ICICIdirect.com. “A stock will continue to remain a good stock until something horrible happens.”